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Clearing and Settlement Mechanisms

Clearing and Settlement Mechanisms (CSMs) are the processes underlying all payment transactions exchanged between two payment service providers (PSPs).

Clearing and Settlement Mechanisms

They are invisible to the end-users of the payment schemes, yet they are indispensable in transferring money from one account to another when two different are involved.

participating in the schemes have to choose a CSM in order to comply with the reachability requirements of the schemes.

Clearing and settlement, a central piece of the payment puzzle

To understand clearing and settlement mechanisms, imagine John, who wishes to transfer money from his account to another person, Anna. This example would also work for any kind of user – a business, a public body, and so on. The two people can either be located in the same country or in two different countries, and in our example they hold payment accounts with different . If John holds sufficient funds in his account, the money is moved to Anna’s account. Behind the scenes, John’s , which we will call ‘ A’ sends a message to a ‘clearing’ system (a company specialising in this activity) asking to move this money to Anna’s , ‘ B’. This clearing company aggregates all orders for transactions to other received from A during a given number of hours, as well as orders for transactions received from its other customers (like B) and intended for other , including A.

The clearing company is then able to ‘net’ the orders: in our simple example, the gross amount of transfers towards B is compared to the amount of transfers towards A (this is the ‘netting’). The net amount of money to be moved from one of the to the other (the final position) is then transferred. This last step is the ‘settlement’ of the transaction: it is now complete, and discharges the obligation of the with a net debit position towards the with a net credit position.

In other words, clearing is defined by the European Central Bank as “the process of transmitting, reconciling and, in some cases, confirming transfer orders prior to settlement, potentially including the netting of orders and the establishment of final positions for settlement.” The settlement is “the completion of a transaction or of processing with the aim of discharging participants’ obligations through the transfer of funds.”

Clearing and settlement in the SEPA schemes context

Services based on the payment schemes and offered by CSM companies are governed by market forces and lie outside the scope of the . There is a clear separation between the as the scheme manager and CSM organisations. Each CSM organisation can propose its own solution, provided that it is compliant with the rules stated in the schemes.

Each participating in the schemes freely works with the CSMs of its choice. What matters is that the is reachable.

As soon as a signals its readiness to participate in the scheme(s), it is obliged to be reachable if it is to receive transactions. This reachability can be achieved by using one or several of the following options:

  • An Automated Clearing House (ACH) that is compliant with a scheme or schemes. An ACH is a multilateral arrangement based on legislation or private contractual arrangements with multiple memberships, common rules and standardised procedures. The transactions are cleared and settled among the members of the ACH.
  • A decentralised bi- or multilateral clearing and settlement arrangement (i.e. not via an ACH) that is compliant with a scheme or schemes. A clears and settles its transactions with another directly in an agreed bilateral channel or through third parties (these parties act as correspondent banks).
  • An intra- and / or intra-group clearing and settlement arrangement that is compliant with a scheme or schemes. In this case, the two are branches or subsidiaries within a single entity or within a group of . They use their respective accounts within that entity or group to clear and settle transactions.
CSM organisations compliant with the EPC SEPA schemes

Any CSM organisation can publicly announce its compliance with an scheme by filing this disclosure letter.

The list below includes all CSM organisations compliant with one or several schemes:

    Overseen by Credit Transfer scheme Direct Debit Core scheme Direct Debit B2B scheme Instant Credit Transfer scheme
Banca d'Italia
Banca d'Italia   Banca d'Italia check check check  
Bankart
Bankart Bank of Slovenia check check check  
Borica
Borica - Bankservice JSC   Bulgarian National Bank check check check  
CEC
CEC-UCV   National Bank of Belgium check check check  
Deutsche Bundesbank

Deutsche Bundesbank

Deutsche Bundesbank check check check  
DIAS
DIAS   Bank of Greece check check check  
EBA Clearing
EBA CLEARING   European Central Bank check check check check

As of 21/11/2017

Equens
EquensWorldline   De Nederlandsche Bank check check check check

As of 21/11/2017

Eurogiro
Eurogiro     check check check  
FINA
Financijska agencija (FINA)   Hrvatska Narodna Banka check      
GSA
GSA   Österreichische Nationalbank check check check  
Iberpay
Iberpay   Banco de Espana check check check check

As of 30/07/2017

ICBPI
ACH ICBPI   Banca d'Italia check check check check

As of 30/07/2017

KIR
KIR   Narodowy Bank Polski check check

As from 4th quarter 2017

check

As from 1st quarter 2018

 
Latvijas Banka
Latvijas Banka   Latvijas Banka check      
Lietuvos Banka
Lietuvos Bankas   Lietuvos Bankas check check   check

As of 21/11/2017

Narodna Banka
Narodna Banka Slovenska   Narodna Banka Slovenska check check check  
Nets
Nets A/S   Finanstilsynet   check check check

As of 01/11/2017

Oesterreichische Nationalbank
Oesterreichische Nationalbank   Oesterreichische Nationalbank check check check  
SIA
SIA   Banca d'Italia check check check  
SIBS
SIBS FPS   Banco de Portugal check check check  
STET
STET   Banque de France check check check check

As of 21/11/2017

TRANSFOND
TRANSFOND   Banca Nationala a Romaniei check      

 

Companies offering messaging services compliant with the schemes

Likewise, any company wishing to disclose its intent to offer messaging services to CSMs that support full compliance with the schemes can file this disclosure letter.

The chart below shows which companies have informed the of their ability to offer such messaging service:

 

    Overseen by For the Credit Transfer scheme For the Direct Debit Core scheme For the Direct Debit B2B scheme For the Instant Credit Transfer scheme
SIA
SIA   Banca d'Italia check check check check
SWIFT
S.W.I.F.T. SCRL     check check check